Pakistan International Airlines (PIA) has reaffirmed its commitment to Pakistan State Oil (PSO) by pledging to pay Rs1.35 billion for fuel supplies, which has enabled PSO to extend a credit facility of Rs500 million to facilitate PIA’s ongoing operations.
Facing financial constraints and amid PIA’s default on payments, PSO has taken a pragmatic step to ensure that the national carrier continues its essential operations by increasing its credit limit for fuel supply from Rs15 billion to Rs15.5 billion, said sources.
Sources familiar with the matter revealed to The Express Tribune that PIA had been making timely payments to international airports but had fallen behind on dues to PSO, leading to a concerning fuel supply crisis.
As per a prior agreement between PSO and PIA, a credit facility of Rs15 billion had already been exhausted by the airline. To address the situation, both parties reached an agreement on October 16, stipulating that PIA would make daily payments of Rs100 million to cover its fuel usage.
However, PIA began receiving supplies in excess of the agreed amount, causing daily bills to exceed the Rs100 million threshold, which, in turn, resulted in accumulating dues owed by PIA to PSO for fuel supplies.
Sources confirmed that PIA had defaulted on payments amounting to Rs2 billion for fuel supplies spanning September and October after utilising its entire credit limit of Rs15 billion.
The airline has since committed to clearing Rs1.35 billion in outstanding dues within a week. Furthermore, PIA conveyed to PSO authorities that it was anticipating a payment of Rs670 million from the religious ministry related to the Hajj operation. PIA expressed its intent to settle its dues with PSO as soon as it received the Rs670 million from the religious ministry.
In a bid to further support the national carrier, PSO, following a recent round of discussions held on October 27, 2023, extended the credit facility by Rs500 million. The decision aims to alleviate some of the financial challenges faced by PIA, allowing the airline to maintain its crucial operations and ensuring that PSO continues to provide fuel for its flights.
In a statement, Pakistan State Oil (PSO) clarified that it has not suspended fuel supply to PIA, contrary to some media reports, despite reduced payments by the airline. PIA was granted a credit limit of Rs15 billion, which was fully utilised.
PSO acknowledges the financial difficulties it is currently experiencing, primarily due to trade receivables totalling Rs765 billion. In response to these challenges, PSO has been actively engaging with PIA to seek a practical and mutually beneficial resolution.
While PIA’s outstanding balance to PSO stood at Rs26.8 billion as of October 26, 2023, PSO remains committed to ensuring a continuous fuel supply to the national carrier. A meeting on October 16, 2023, brought together senior officials from both organisations to work out a feasible strategy. As per the understanding reached during this meeting, PSO will continue fuel supplies to PIA, with payment prioritised on a flight-wise basis.
PSO has emphasised its commitment to providing uninterrupted service to PIA, underscoring the importance of a resolution that aligns with the interests of both entities.
Published in The Express Tribune, October 29th, 2023.
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